yyzer
Senior Member
from today's Globe....in another thread, I recently stated that a 'recession' is exactly the time when the rich, smart guys buy property....well, here, imo, is a perfect example....
Brookfield's $4.9-billion bet on the bottom
Canada's largest conglomerate plans to raise billions to buy homes, office towers and shopping malls around the globe
Last updated on Wednesday, Aug. 12, 2009 08:36AM EDT
There are 3,200 unfinished McMansions sitting in a suburban Los Angeles neighbourhood, where developers spent more than $150-million (U.S.) to build sewers, grade lots and pave roads for an upscale development, only to see the market crash.
These homes are at the heart of the real estate meltdown and Toronto-based Brookfield Asset Management Inc. (BAM.A-T21.79-0.24-1.09%) recently bought this Riverside, Calif., development out of bankruptcy – for 20 cents on the dollar.
Canada's largest conglomerate is betting the real estate market has hit bottom, and announced plans Tuesday to back its contrarian wager by raising a stunning $4.9-billion to buy homes, office towers and shopping malls around the globe.
Brookfield and real estate subsidiary Brookfield Properties Corp. (BPO-T11.29-0.33-2.84%) revealed Tuesday that they have struck a $4-billion, real estate turnaround fund, backed by a dozen major institutional investors. At a time when the sector is cash-strapped, the fund plans to buy properties or take stakes in real estate companies.
Calling a bottom to the real estate market is not for the faint-of-heart. Brookfield is planning to buy at a time when U.S. house prices continue to fall, and mall and office building owners are struggling to keep tenants and collect rent. Other deep-pocketed fund managers are still coping with the hangover from the real estate bust: The Caisse de dépôt et placement du Québec took a $4-billion (Canadian) writedown Tuesday on its property holdings.
Brookfield chief executive officer Bruce Flatt acknowledged that he is going against the flow by taking on projects such as a California subdivision full of unfinished, outsized homes that come with massive garages and “whisper sinks” (a trumpeted feature of kitchen sinks made of cast iron, rather than noisy, thin stainless steel).
“We do know this is currently one of the worst residential markets in the U.S.,” Mr. Flatt said in explaining the Riverside project during a conference call last Friday. “However, just to put it into perspective, the lots are within an hour of Los Angeles [and] were purchased for less than 10 per cent of the value attributed to land and infrastructure at the peak. … So these are at pretty low values.”
Separately, Brookfield Properties announced Tuesday that it will raise $900-million in a stock sale to finance expansion and pay down debt, with its parent stepping up for $450-million of the new shares. Four investment dealers – RBC Dominion Securities, Citigroup, Deutsche Bank and TD Securities – planned to sell the rest of the stock overnight.
This is also a bet that Brookfield and Brookfield Properties can combine a good eye for property with in-house financing skills, including experience in helping companies with balance sheet problems.
“This is the next step in our global property growth plan, as it combines our strength as one of the world's leading real estate operating companies with our extensive expertise in corporate restructurings and strategic acquisitions,” Ric Clark, CEO of Brookfield Properties, said in launching the $4-billion fund.
Brookfield committed $1-billion to the turnaround fund, and unnamed outside backers are putting in anywhere from $300-million to $1-billion. The fund will target corporate property restructurings and invest a minimum of $500-million at a time, with a focus on real estate plays in North America, Europe and Australasia.
“Brookfield management believes that the worst is over in the U.S. housing market and that a turn in a number of regions has occurred or will happen soon,” said Murray Leith, an analyst at investment dealer Odlum Brown.
“Over all, we believe the infrastructure asset management industry is in the early stages of a multidecade growth trajectory,” he said.
And Brookfield is thinking about real estate holdings in terms of decades. During last Friday's conference call, Mr. Flatt said it anticipates making up to a seven-fold return on its recent investment in Riverside, Calif., over the next 10 years.
Brookfield's $4.9-billion bet on the bottom
Canada's largest conglomerate plans to raise billions to buy homes, office towers and shopping malls around the globe
Last updated on Wednesday, Aug. 12, 2009 08:36AM EDT
There are 3,200 unfinished McMansions sitting in a suburban Los Angeles neighbourhood, where developers spent more than $150-million (U.S.) to build sewers, grade lots and pave roads for an upscale development, only to see the market crash.
These homes are at the heart of the real estate meltdown and Toronto-based Brookfield Asset Management Inc. (BAM.A-T21.79-0.24-1.09%) recently bought this Riverside, Calif., development out of bankruptcy – for 20 cents on the dollar.
Canada's largest conglomerate is betting the real estate market has hit bottom, and announced plans Tuesday to back its contrarian wager by raising a stunning $4.9-billion to buy homes, office towers and shopping malls around the globe.
Brookfield and real estate subsidiary Brookfield Properties Corp. (BPO-T11.29-0.33-2.84%) revealed Tuesday that they have struck a $4-billion, real estate turnaround fund, backed by a dozen major institutional investors. At a time when the sector is cash-strapped, the fund plans to buy properties or take stakes in real estate companies.
Calling a bottom to the real estate market is not for the faint-of-heart. Brookfield is planning to buy at a time when U.S. house prices continue to fall, and mall and office building owners are struggling to keep tenants and collect rent. Other deep-pocketed fund managers are still coping with the hangover from the real estate bust: The Caisse de dépôt et placement du Québec took a $4-billion (Canadian) writedown Tuesday on its property holdings.
Brookfield chief executive officer Bruce Flatt acknowledged that he is going against the flow by taking on projects such as a California subdivision full of unfinished, outsized homes that come with massive garages and “whisper sinks” (a trumpeted feature of kitchen sinks made of cast iron, rather than noisy, thin stainless steel).
“We do know this is currently one of the worst residential markets in the U.S.,” Mr. Flatt said in explaining the Riverside project during a conference call last Friday. “However, just to put it into perspective, the lots are within an hour of Los Angeles [and] were purchased for less than 10 per cent of the value attributed to land and infrastructure at the peak. … So these are at pretty low values.”
Separately, Brookfield Properties announced Tuesday that it will raise $900-million in a stock sale to finance expansion and pay down debt, with its parent stepping up for $450-million of the new shares. Four investment dealers – RBC Dominion Securities, Citigroup, Deutsche Bank and TD Securities – planned to sell the rest of the stock overnight.
This is also a bet that Brookfield and Brookfield Properties can combine a good eye for property with in-house financing skills, including experience in helping companies with balance sheet problems.
“This is the next step in our global property growth plan, as it combines our strength as one of the world's leading real estate operating companies with our extensive expertise in corporate restructurings and strategic acquisitions,” Ric Clark, CEO of Brookfield Properties, said in launching the $4-billion fund.
Brookfield committed $1-billion to the turnaround fund, and unnamed outside backers are putting in anywhere from $300-million to $1-billion. The fund will target corporate property restructurings and invest a minimum of $500-million at a time, with a focus on real estate plays in North America, Europe and Australasia.
“Brookfield management believes that the worst is over in the U.S. housing market and that a turn in a number of regions has occurred or will happen soon,” said Murray Leith, an analyst at investment dealer Odlum Brown.
“Over all, we believe the infrastructure asset management industry is in the early stages of a multidecade growth trajectory,” he said.
And Brookfield is thinking about real estate holdings in terms of decades. During last Friday's conference call, Mr. Flatt said it anticipates making up to a seven-fold return on its recent investment in Riverside, Calif., over the next 10 years.
